Fraudsters are continually looking for new ways to ruin the e-commerce shopping experience. And whether they’re hacking mobile devices and accounts or filing fraudulent chargebacks, they’re getter better at staying one step ahead of payment fraud protection.
The good news is that e-commerce sales just keep growing – with 2017 seeing a comfortable 16% growth in revenue over 2016. To make sure fraudsters don’t take any more of this pie, it’s up to merchants to be aware of new developments on the fraud landscape. Once merchants educate themselves on the tricks fraudsters like to use, they can beef up their security and stop those fraudsters in their tracks.
Here are seven of the biggest payment fraud trends online retailers should be watching for and defending against this year.
1. Friendly Fraud
Friendly fraud is the term used when a cardholder incorrectly files a chargeback on a purchase they forgot they made. Generally, these customers aren’t trying to be deceitful; they’re just making an honest mistake. Even so, this fraud hits merchants hard: E-commerce retailers lost a whopping $4.8 billion to friendly fraud in 2016.
2. Chargeback Fraud
Chargeback fraud isn’t any less devastating. In these scenarios, the customer files a chargeback on a legitimate transaction so they can keep the product and receive a full refund on the original purchase. This means the retailer loses the product, sunken shipping costs, high chargeback fees and more. It’s a massive problem, and estimated chargeback losses are projected to top $31 billion by 2020.
3. International e-Commerce
Mobile commerce has opened up a literal world of e-commerce opportunities, enabling merchants to expand globally and grow their sales by as much as 15%. But international sales also opens retailers up to new risks and expensive payment fraud. By the year 2022, global losses due to fraud are expected to reach $71 billion.
4. Wire Fraud
A somewhat misleading name, wire fraud refers to any fraud involving communications technology, including emails, text messages and phone calls. Phishing is one of the more well-known wire fraud scams — and it’s well-known because it works. Approximately 30% of phishing emails get opened, leaving businesses scrambling to protect their sensitive data before financial and reputational damage is done. Phishing attacks grew 250% in first-quarter 2016 alone, and large companies report that these attacks costs them $3.7 million yearly.
5. Mobile Wallet Fraud
Payments using such mobile wallets as Apple Pay and Visa Checkout are expected to account for 22% of online purchases by 2019. However, unsecured mobile devices, easy-to-guess passwords and unencrypted transmissions make it easy for hackers to steal sensitive data and capture payment credentials. Additionally, cybercriminals have been busy developing and launching malware that targets mobile devices to gather data, take control of the devices and modify their settings.
Malware used to be reasonably easy for merchants to identify and stop simply by using off-the-shelf antimalware software. Unfortunately, malware has become increasingly harder to detect, especially with the proliferation of Internet of Things (IoT) devices. Many IoT units have insufficient security features in place to prevent hijackings – something many new parents have discovered as their wireless baby monitors have been targeted by hackers. Unfortunately, consumers typically are unaware they should change passwords and update firmware to protect their devices from these vulnerabilities.
7. Voice Commerce
If one-click checkout wasn’t easy enough, voice-enabled payments offered through Amazon Echo and others make it even easier to place online orders by merely speaking to an enabled device. While the Echo is currently limited to making purchases through the Amazon website, it’s reasonable to expect that soon the Amazon Pay platform will let customers use their Echo to make purchases at thousands of other merchants as well. And with an estimated future $150 billion in voice transactions, merchants must expect that fraudsters are already planning ways to attack this new sales channel.
Fighting Payment Fraud Using a Comprehensive Approach
Juniper Research has found that retailers stand to lose $71 billion globally from fraudulent card-not-present transactions in the next five years, which means e-commerce merchants must prepare for inevitable attacks.
Technology is evolving, so fraud protection must, too.
To stay on top of these trends, merchants should consider implementing a robust fraud protection solution that leverages a combination of sophisticated machine learning to quickly identify suspicious patterns plus advanced human intelligence to perform experienced risk assessments, all while delivering a fast and frictionless customer experiences that reduces the risk of payment fraud.
When you’re ready to implement a solution that addresses the complexities of e-commerce today, contact a ClearSale analyst. We’ll show you how our hybrid approach can help you be smarter about — and better at — fighting fraud.